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NEW DELHI: The Serious Fraud Investigation Office (SFIO) has received a complaint against Larsen Toubro alleging “thousands of crores” of financial irregularities, including money laundering and tax evasion, a charge that the infrastructure giant rubbished as “baseless”.
Acting on the complaint received, SFIO’s Mumbai regional office has written to the head-office here stating that it “is a fit case to be investigated” as it will “help in unearthing wrong doings of LT group, in terms of misappropriation of money, money laundering and tax evasion”.
In the complaint, Rajya Sabha MP Kahkashan Perween has alleged that loans worth Rs 8,000 crore given to the Group for road projects face serious threat of turning into NPAs. It alleged irregularities in two projects – LT Halol Shamlaji Tollway Ltd (LT Halol) and LT Chennai Tada Ltd.
LT and its arms, which are engaged in highway projects have been termed as “habitual defaulters” by NHAI, which is likely to have a severe negative impact on loans worth Rs 8,000 crore given by various banks to the Group, as per the complaint by the MP.
LT, however, dismissed the allegations as “baseless and without any merit”, and said it has no information about any investigation.
“Efforts by public sector banks to bail out LT Halol Shamlaji Tollway Ltd (LT Halol) under the guise of debt-restructuring schemes will only benefit unscrupulous promoters i e LT at the cost of banks, financial institutions and public at large,” the complaint alleged.
Besides, it added that loan accounts of Chennai Tada Ltd have already turned non performing assets since September 2015 and recovery of the same is under serious threat.
“LT and its group companies be black listed and the banks and public financial institutions be prohibited from granting any further loans to them considering their record of frittering away public money,” the MP said in the letter written to the SFIO.
The complaint also sought to direct the LT (being the holding company) to repay the loans due to banks and institutions.
When contacted, LT said, “We are not aware of any so called investigation … We strongly deny the allegations which are entirely baseless and without merit. LT has always maintained high standards of corporate governance and compliance of statutory and regulatory requirements”.
The company said it is important to note that LT Infrastructure Development Pvt Ltd (LTIDPL), the promoter of LT Chennai Tada Tollways and LT Halol Shamlaji Tollway, “has neither received a return of nor a return on its investments made in these two companies.”
In spite of the specific commercial understanding that the projects are funded on a non-recourse basis, the promoter has infused into the two projects substantial amounts over and above its obligations and commitments under the loan documents to service the loans from the lenders, the letter said.
“Attributing any motives of mismanagement against the project company, promoters LTIDPL (or the parent company LT) is entirely baseless and totally uncalled for,” the company said.
LT said as far as LT Chennai Tada Tollways Ltd was concerned, the NHAI despite fixing October 1, 2011 for completion, “was never in a position to hand over either 60 per cent of the total Right of Way on the Appointed Date (April 3, 2009) or 100 per cent of the Right of Way within 90 days from the Appointed Date.
“NHAI’s failure to honour its commitment even after 6 years from the Appointed Date under the Concession Agreement (CA) resulted in considerable losses for the Concessionaire. Failure of NHAI to hand over the land in time and pay damages had adversely impacted the construction schedule, both in terms of time and cost, and as a consequence, the SPV had to invoke Material Adverse Effect as defined in the CA”.
LT said the company had requested NHAI to pay Rs 453.4 crores on March 18, 2015 for losses suffered and an arbitration process is pending against the authority.
“As NHAI refused to compensate the Concessionaire and as the continued breach by NHAI was causing irreparable financial burden on the Concessionaire, the Concessionaire was left with no option but to terminate the Concession Agreement,” the company said, adding that the pact was terminated with effect from June 24, 2015.
It said an application was filed under the Arbitration Act before the Delhi High Court.
The court in its Order dated May 2016 directed NHAI that the toll collected by it through the tolling contractor be deposited in the Escrow Account as large amount of debt is still owed to the lenders/banks.
About LT Halol Shamlaji Tollway Ltd, it said bid was awarded for a four lane state highway on BOT in Gujarat and despite various challenges the road was built within stipulated time.
The bidding was based on estimates of base year traffic and growth projections linked to economic growth of Gujarat, but due to development of an alternate road by the state there was a significant change in traffic pattern.
“Despite the challenges, the promoter had infused into the Project Rs 247 crore over and above the Rs 524 crores required under the loan documents primarily to service lenders,” LT said, adding that HSTL served a notice of termination to GSRDC in April 2016 citing an Authority Event of Default.
It said since no termination action was forthcoming from the GSRDC, the Allahabad Bank-led consortium sought to revive the project under the SDR Scheme of RBI.